Legal structures: which one?

Erica CrumpJoanna Stokes

Charitable Company Limited by Guarantee

Key points:

• Established as a company limited by guarantee at Companies House (no shares, just members)

• Needs to have exclusively charitable purposes and be for the public benefit

• Then apply to the Charity Commission to become a registered charity

• Regulated by Companies House and the Charity Commission

Charitable Company Limited by Guarantee

May be the right choice for you if:

• What you want to do falls within a charitable purpose and benefits the public

• You need charitable status to obtain funding

• It is important for you to be able to claim tax reliefs

• You want to raise money through donations from the public, and need a registered charity number

May not be the right choice for you if:

• You want to be employed by the organisation and be a director

• You want to carry out extensive commercial activities or activities which are not charitable

• You want to make all of the decisions in relation to the organisation yourself

Community Interest Company (CIC)

Key points:

• Can be established as a company limited by guarantee or a company limited by shares at Companies House

• Needs to have a purpose which benefits the community (widely interpreted) and certain restrictions on asset distribution

• The CIC Regulator needs to approve the establishment

• Regulated by Companies House and the CIC Regulator

Community Interest Company (CIC)

May be the right choice for you if:

• You want to carry out more commercial activities than a charity can, but still for community benefit

• You want to benefit from the social enterprise ‘brand’

• You want to raise equity finance and pay dividends (but only up to certain limits)

• You want employees to be directors

May not be the right choice for you if:

• Organisations you are likely to seek funding from will only fund charitable organisations

• You need to benefit from charitable tax reliefs

• You want more flexibility in terms of activities

Non-charitable Company Limited by Guarantee (CLG)

Key points:

• Established at Companies House as a company limited by guarantee (no shares, just members)

• No specific requirements as to what purposes or activities the company has

• Only regulator is Companies House

Non-charitable Company Limited by Guarantee (CLG)

May be the right choice for you if:

• You do not want to be subject to restrictions on your activities

• You want to have employees who are directors, or be the sole director

• You want to minimise regulation and the burden of filing with different regulators

• You want to set up your organisation very quickly

May not be the right choice for you if:

• You need to have charitable status to obtain funding

• You want to raise equity finance and pay dividends

• You want to have the brand of a charity or CIC

Contact details

Erica Crump

Senior Associate

Charity & Social Enterprise Department

Bates Wells & Braithwaite London LLP

2-6 Cannon Street

London EC4M 6YH

e.crump@bwbllp.com

Tel: 020 7551 7796

Joanna Stokes

Solicitor

Charity & Social Enterprise Department

Bates Wells & Braithwaite London LLP

2-6 Cannon Street

London EC4M 6YH

j.stokes@bwbllp.com

Tel: 020 7551 7793